Sunoco 2011 Annual Report Download - page 30

Pipeline operations of Sunoco Logistics Partners L.P. face significant competition from other pipelines for
large volume shipments. These operations also face competition from trucks for incremental and marginal
volumes in areas served by the Partnership’s pipelines. The Partnership’s refined product terminals compete with
terminals owned by integrated petroleum companies, refining and marketing companies, independent terminal
companies and distribution companies with marketing and trading operations.
The actions of our competitors, including the impact of foreign imports, could lead to lower prices or
reduced margins for the products we sell, which could have an adverse effect on our business or results of
operations.
We are exposed to the credit and other counterparty risk of our customers in the ordinary course of our
business.
We have various credit terms with virtually all of our customers, and our customers have varying degrees of
creditworthiness. Although we evaluate the creditworthiness of each of our customers, we may not always be
able to fully anticipate or detect deterioration in their creditworthiness and overall financial condition, which
could expose us to an increased risk of nonpayment or other default under our contracts and other arrangements
with them. In the event that a material customer or customers default on their payment obligations to us, this
could materially adversely affect our financial condition, results of operations or cash flows.
We maintain insurance against many, but not all, potential losses or liabilities arising from operating hazards
in amounts that we believe to be prudent. Failure by one or more insurers to honor their coverage
commitments for an insured event could materially and adversely affect our future cash flows, operating
results and financial condition.
Our business is subject to hazards and risks inherent in refining operations and the transportation and
storage of crude oil and refined products. These risks include explosions, fires, spills, adverse weather, natural
disasters, mechanical failures, security breaches at our facilities, labor disputes and maritime accidents, any of
which could result in loss of life or equipment, business interruptions, environmental pollution, personal injury
and damage to our property and that of others. In addition, certain of our facilities provide or share necessary
resources, materials or utilities, rely on common resources or utilities for their supply, distribution or materials or
are located in close proximity to other of our facilities. As a result, an event, such as the closure of a
transportation route, could adversely affect more than one facility. Our refineries, pipelines and storage facilities
also may be potential targets for terrorist attacks.
We maintain insurance against many, but not all, potential losses or liabilities arising from operating
hazards in amounts that we believe to be prudent. Our insurance program includes a number of insurance
carriers. Disruptions in the U.S. financial markets have resulted in the deterioration in the financial condition of
many financial institutions, including insurance companies. In light of this uncertainty, it is possible that we may
not be able to obtain insurance coverage for insured events. Our failure to do so could have a material adverse
effect on our future cash flows, operating results and financial condition.
Our operating facilities, and in particular our refineries, require substantial capital expenditures to maintain
their reliability and efficiency. If we are unable to complete capital projects at their expected costs and/or in a
timely manner, or if the market conditions assumed in our project economics deteriorate, our financial
condition, results of operations or cash flows could be materially and adversely affected.
Delays or cost increases related to capital spending programs involving engineering, procurement and
construction of new facilities (or improvements and repairs to our existing facilities) could adversely affect our
ability to achieve forecasted internal rates of return and operating results. Delays in making required changes or
upgrades to our facilities could subject us to fines or penalties as well as affect our ability to supply certain
products we make. Such delays or cost increases may arise as a result of unpredictable factors in the marketplace,
many of which are beyond our control, including:
• denial or delay in issuing regulatory approvals and/or permits;
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